According to the H2-View, McKinsey has revised its hydrogen demand forecast for 2050, reducing it by as much as 25%. The consultancy attributes this adjustment to rising costs and growing regulatory uncertainties, which are hindering the sector’s expected growth.
In its most recent Global Energy Perspective report, McKinsey underscores that while hydrogen is still a vital element of the clean energy transition, the industry is encountering increasing capital expenses, slower technological advancements, and higher costs associated with renewable energy storage and electrolysis.
As a result, green hydrogen production costs have surged by 20-40%. Although the demand for hydrogen is still anticipated to increase, particularly in sectors like chemicals and refining, McKinsey expects a smaller uptake in areas such as road transport and buildings.
By 2050, the report projects global green hydrogen consumption to reach 179 million tonnes annually, up from the current figure of less than 1 million tonnes. However, the slower pace of hydrogen adoption could prolong the use of natural gas, with blue hydrogen playing a key role in meeting future demand.
McKinsey’s broader message is that the global energy transition is moving into a more challenging phase, characterized by higher costs, complexity, and mounting obstacles.
The report also notes that while low-carbon energy sources are likely to account for 65-80% of global power generation by 2050, their growth is not fast enough to meet the short-term targets needed for Net Zero.
Even though technologies with a low levelized cost of energy, like wind and solar, are expected to continue expanding, solutions such as hydrogen, e-fuels, and carbon capture still face challenges due to limited demand and insufficient policy support.
Diego Hernandez Diaz, a Partner at McKinsey, commented that although there has been a global surge in Net Zero commitments, the technologies required to achieve these targets are not progressing at the necessary pace. He pointed out that low-carbon solutions are struggling to scale up, with rising interest rates and supply chain issues limiting access to capital.
McKinsey’s revised forecast suggests a 10-25% reduction in hydrogen growth expectations for 2050 compared to its previous projections, mainly due to increased cost estimates.
The consultancy pointed out that heightened capital costs, slower learning rates, more expensive electrolysers, and higher renewable energy storage costs have pushed green hydrogen prices up by 20-40%. Regulatory uncertainty is also adding to these challenges.
While hydrogen demand is still set to grow, McKinsey’s analysis indicates that the slower rate of growth will reduce the associated power demand for hydrogen production compared to previous expectations, though it will still be higher than today’s levels.
Nonetheless, McKinsey expects green hydrogen to dominate future demand, accounting for 50-70% of total consumption. The primary drivers of this demand will likely come from traditional sectors such as chemicals and refining, while uptake in road transport and buildings is projected to be lower than initially anticipated.
If the current trajectory continues, McKinsey expects global green hydrogen consumption to reach 179 million tonnes annually by 2050, a substantial increase from today’s level of less than 1 million tonnes and the 5 million tonnes expected by 2030.
However, given the slower adoption of hydrogen technologies, McKinsey predicts that natural gas demand will continue to rise into the 2030s, particularly in power generation and heating for industrial and residential applications. Blue hydrogen is also expected to contribute to this growing natural gas demand, with McKinsey forecasting that by 2050, demand for gas used in blue hydrogen production could reach between 40 and 100 million tonnes annually.
